Rauner budget hits hospitals, nursing homes
CHICAGO -- In proposing to cut Illinois' Medicaid program by $1.5 billion, Gov. Bruce Rauner has chosen to go toe-to-toe with three powerful business lobbies: retail pharmacies, nursing homes and hospitals.
The Republican wants to reinstate service cuts temporarily made to Medicaid in 2012 and later restored by the Legislature and his Democratic predecessor, Gov. Pat Quinn. That would eliminate -- again -- optional Medicaid services such as adult dental care and podiatry. But Rauner surprised stakeholders by pushing further: proposing nearly $1 billion in payment cuts to health care institutions that traditionally have been able to fight them off.
Medicaid occupies a huge part of all states' budgets. It's no surprise Rauner and his advisers see the federal and state health insurance program for the poor as a target for savings as they try to close a $6.2 billion budget deficit, lawmakers of both parties said.
"You know why a robber robs a bank? That's where the money is," said Rep. Sara Feigenholtz, a Chicago Democrat. "Medicaid is the bank."
Rauner's plan, unveiled Wednesday, recommends roughly $19 billion in Medicaid spending to cover nearly 3.5 million Illinoisans. It would maintain eligibility levels and avoid charging higher copays or adding token premium contributions -- strategies some stakeholders had expected Rauner to employ.
Instead, hospitals are a main target, shouldering $735 million in payment cuts -- a 13 percent reduction, according to the Illinois Hospital Association. That may prove difficult to accomplish. Hospitals are major employers in many districts and the association will tell lawmakers the statewide economic impact of cuts would equate to 12,591 jobs lost.
The association's political action committee contributes to candidates of both parties, giving $463,055 last year in Illinois races, including $150,000 to Pat Quinn's losing campaign.
Republicans, who want to back Rauner, may have trouble supporting the cuts after they hear from local hospital leaders.
"There will be difficult discussions," predicted Rep. Patti Bellock, a Hinsdale Republican who helped lead a bipartisan panel that hammered out the Medicaid cuts passed in 2012 known as the SMART Act. "There are a lot of districts where hospitals are extremely important. I consider them the backbone of our communities."
Democrats, meanwhile, will be pushing for new revenue. The SMART Act included a $1-per-pack increase in the cigarette tax, noted Sen. Heather Steans, a Chicago Democrat who co-led the 2012 Medicaid overhaul effort.
"We've already made most of the eligibility and service reductions allowed," Steans said. "Everything has to be discussed and negotiated in the context of where we can find savings in the overall budget and where we can put revenues on the table."
Rauner's budget office said his proposal is at least partially an attempt to get hospitals to rethink how they are paid. Over the years, Medicaid payments to hospitals have become convoluted and difficult to understand. A Rauner budget official described the payment system as "a disaster."
The proposed payment cut to hospitals is nearly three times what the facilities lost in funding in 2012, said A.J. Wilhelmi of the Illinois Hospital Association. He warned of unintended consequences. "When you cut Medicaid, there's a cost shift to the private insurance market and therefore middle-class families will pay more," Wilhelmi said.
Rauner's budget would cut $216 million from nursing homes (a SMART Act restoration) and save $40 million by ending a fee to pharmacies for dispensing brand-name drugs.
The reaction from the nursing home industry has been muted. Pat Comstock, of the Health Care Council of Illinois, said the nursing home advocacy group looks forward to working with Rauner and the Legislature "to ensure the budget protects funding for nursing homes, so residents continue to get quality care, staff continue to have job security and families can continue to depend on nursing homes to care for their loved ones."
Illinois Retail Merchants Association President Rob Karr called the cut to pharmacies "a pretty brutal hit" on top of 2012 reductions. "You can't fill a prescription for nothing," Karr said.
As some Republican governors lash out against President Barack Obama's health care law, Rauner's budget reveals a cautious co-existence with it. The governor's overall budget counts nearly $98 million in savings by assuming certain people -- women, people with AIDS and home-care workers -- can get subsidized private health insurance through the HealthCare.gov insurance exchange.
Through the health care law's Medicaid expansion, the federal government is paying the entire cost of covering more than 572,000 Illinois adults who previously had no insurance and wound up as charity care cases when they got sick; that support gradually falls to 90 percent by 2020 where it remains.
Rauner's budget office said opting out of the Medicaid expansion was an option that was "toyed with" and rejected "at this time."